A close family friend has approached you to help her determine which of the two common stocks she should invest in. Common Stock A Common Stock B Probability Return Probability Return 0.3 11% 0.2 -5% 0.4 15% 0.3 6% 0.3 19% 0.3 14% 0.2 22% Required: a) Calculate the expected returns of stock A b) Determine the risk (standard deviation) and return of stock A c) Calculate the expected returns of stock B d) Determine the risk (standard deviation) and return of stock B e) Which investment should your friend invest in?

A close family friend has approached you to help her determine which of the two common stocks she should invest in. Common Stock A Common Stock B Probability Return Probability Return 0.3 11% 0.2 -5% 0.4 15% 0.3 6% 0.3 19% 0.3 14% 0.2 22% Required: a) Calculate the expected returns of stock A b) Determine the risk (standard deviation) and return of stock A c) Calculate the expected returns of stock B d) Determine the risk (standard deviation) and return of stock B e) Which investment should your friend invest in?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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